Allegheny Health Network reports second-quarter operating profit

Allegheny Health Network reported operating income of $1.1 million for the three-month period that ended June 30, exceeding projections for the quarter as parent company Highmark Health attempts to rehabilitate the seven-hospital system, according to Pennsylvania Insurance Department filings posted Wednesday.

The system had projected losses of $8.9 million for the quarter, according to a financial statement published as part of a corrective action plan Highmark Health filed with the state in the fall.

The net income for the quarter was $1.92 million, compared to a projected net loss of $11.7 million. The results contrast with major operating losses dating to 2013, when Highmark Health acquired the former West Penn Allegheny Health System to form the core of Allegheny Health Network.

“The results reflect considerable progress made in the quarter,” AHN spokesman Dan Laurent said in a statement. “We still have a lot of hard work ahead of us to achieve the goals established in our corrective action plan, but the organization’s performance in the second quarter and through the first six months of the year demonstrate that our strategy is sound.”

Patient volumes have remained steady as the numbers improved, suggesting managers may have achieved greater efficiency within the system, said Stephen Foreman, an associate professor of health care administration at Robert Morris University.

“I think everybody ought to see this as a positive; everybody in town who wants to see AHN continue,” Foreman said.

Several factors contributed to the improvement, Laurent wrote in an email. The system has improved operational efficiencies, worked to make sure hospitals are “paid appropriately and in a timely manner” for services, made patient-to-program referrals more efficient, streamlined electronic health records, expanded specialty services at community hospitals, improved call center operations to better schedule appointments and achieved more favorable contracting with supply chain vendors and utilities, among other initiatives, he said.

The system remained behind projections for 2016, with an operating loss of $16.7 million compared to a projected $14.1 million loss, the filing shows. The filing projects three years of revenues and expenses, including capital investments in hospitals and outpatient facilities.

The second-quarter gain followed a first-quarter net loss of $20.6 million, according to filings. The system had projected a $9.3 million loss for the first quarter.

A mild flu season contributed to lower-than-expected inpatient and outpatient visits for the year, Laurent said. The implementation of electronic health records at Allegheny General Hospital contributed to the first-quarter loss, he said.

The electronic health records system launched at West Penn Hospital in the second quarter, and Forbes Hospital and the Wexford Health + Wellness Pavilion are on the same system, he said.

AHN reported a less-than-expected net loss of $39 million for 2015. The three-year plan projects net losses of $43 million for 2016 and $25 million for 2017.

Wednesday’s filing was part of a state requirement related to Highmark Health’s formation of Allegheny Health Network in 2013, which included purchasing and investing in Allegheny General, West Penn and other facilities in the system.

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